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Accrual Accounting and Financial Statements

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Discuss how accrual accounting enhances the usefulness of financial statements.

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Accrual accounting and financial statements are examined.

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Meaning of accrual basis of accounting:

In accrual basis of accounting, the income is reported as soon as it is earned and expenses will be reported as soon as it is incurred. In accrual basis, the company has the discretion of when the income and expense can be recognized. Revenue is recognized when the revenue is earned and the revenue is realized or realizable. Likewise, expense is recognized when the related revenue is recognized.

It incorporates income as soon as it is accrued and does not consider whether the income is actually received in the year. .i.e., the revenue should be recognized as soon as it is earned. How accrual accounting enhances the usefulness of financial statements:

Accrual ...

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